You click on a button on your iPhone and it immediately bursts into life, the blinking “slide to unlock” label hinting at the direction of the motion it wants you to make. That rich, lively screen just begs for your attention. Add to that the layer of notifications and you have no willpower left to resist. No matter what’s happening around you: a kid wanting to play with you, a book waiting to be read, a view that wants to be soaked in – once the iPhone wakes up, everything else in the room disappears; your attention’s been stolen by that burst of light. The iPhone (and the iPad, for that matter) is a needy, attention-craving siren that will enslave your attention by it’s amazing beauty at the expense of the world around you. It’s a temptress that constantly reminds you: “You could be on Twitter now” or “You could engage with your friends on Facebook now.”

The Dopamine release

When you check your information, when you get a buzz in your pocket, when you get a ring – you get what they call a dopamine squirt. You get this little rush of adrenaline and, most of the time, you are disappointed. Sure, you get this little information nuggets, the location of your friends, the links they share, the inconsequential email but it’s doesn’t satisfy your craving for more. But when you don’t get this little alarms, you feel bored, you want that little excitement. You’re being conditioned by technology to check, check, check and check.

Information is like food. It nourishes us and we need it to survive in the 21st technology, to be a productive citizen. Yet, food has positives and negatives. As Fast Food Nation clearly showcased, a steady diet of fast food won’t lead to any good. Actually, it might lead to your quick demise. While we know to distinguish between Twinkies and Muesli, we still have trouble distinguishing between information red meat and information red grain.

The diminishing returns of noisy technology

Over time, we have created our information foundation: Email, Facebook, Twitter, Messageboards, Foursquare and other platforms that solve problems for each individual. We don’t have a lot of attention left in our life to add more information and platforms. Apps and destinations became more noisy to get our attention. Just like a gathering that started out as a small dinner party, developed into a party with loud music and now looks like this:

(Talking about Dopamine.) You can enjoy a rave for a few hours, maybe even all night and a nice sunrise. But it’s not a sustainable model. We can’t continue to add new technologies and new platforms, begging us for information constantly without hitting the wall. I would argue, we’ve already reached that wall and we’re about to hit it.

Nobody is saying noisy technologies will disappear. It’s just too intriguing and easy to blink, flash and beep to get the attention of people. But the returns are diminishing and people are starting to look for technologies that solve problems with out being a needy temptress.

In Part 3 we’ll talk about the emergency of calm technologies and their integration into the information ecosystem.

“(In the publishing business) the readers are the product, and the customers are the advertisers.” – Dave Winer

It started with Path last week, and now we learned that Facebook, Twitter, Foursquare, Instagram, Foodspotting, Yelp, and Gowalla all either upload your contacts’ phone numbers or email addresses to their servers for matching purposes.

As the post on Venturebeat states:

“Some of these applications perform this action without first requesting permission or informing you how long they plan to store this data. Foodspotting is the worst of the bunch, as it appears to transmit your data over an unencrypted HTTP connection (in plain text), making it even easier for mischievous parties to intercept.”

It’s a sign of a major problem.

Tulip Mania. Railway Mania. Poseidon Bubble. Japanese asset price bubble. Dot-com bubble. Rice bubble. Housing bubble. Bubbles after bubbles. After the housing bubble, one would think we’d have enough of bubbles for a long time to come. Think again.

The dot-com crash had nothing to do with technology. It had everything to do with the business model used to pay for the technology, which was primarily either display advertising revenue or VC money advanced with the expectations of returns based on display advertising. Display Advertising was trackable, it would be more effective online than offline. The bubble burst, crazy valuations went away and the digital ad market boomed. Ad Networks, DSP’s and exchanged drove down the value of ad impressions. CPM’s went from $100 for premier placements to $10. And impression junk was and is still anywhere. Suddenly, new businesses that relied on advertising revenue to support their model had to pivot.

Welcome to the age of user data.

Massive assumptions are now being made based on revenue generated (or soon to be generated) by personally targeted advertising drawing on user data. Facebook has a business model but their valuation is based on future realization of user data. Twitter doesn’t have a sustainable business model yet but it’s worth billions of dollars.

Often, companies don’t even know what to do with this data, they just have it because one day it will rain gold. You can’t open your computer without reading of the promises of Big Data. Your user data, goes the theory, allows ads to be specifically targeted to you. Should you buy a big bag of dog food, you will likely receive more ads for dog products, sometimes coupons. You’ll be grouped in a segment with other “dog food buyers”, your age and location will be determined, and a data model of you will be developed. A very simplistic one-dimensional model of you is living in some data warehouse and that’s why you encounter all those online ads.

The problem is not with the use of data to make decisions – the problem is with the simplistic one-dimensional use of data to make decisions. And the other problem with this assumption is that it believes in the rational consumers. Targeted advertising draws on the idea of our observed behavior presenting a coherent and realistic picture of our desires and needs.

It doesn’t.

My spending behavior in 2010 bears no relation to my spending currently or in the future – economies change, circumstances change, tastes change, opportunities change. More importantly, we are social beings, not rational beings. We are more driven by emotions and our clique than anything you can find in our brains.

As we know, targeting works on a limited scale. It does lift metrics, it improves performance. But the user data dream that one day all served ads will be relevant and lead to immediate conversion is just that: a dream. I’m not trying to minimize the opportunities at the intersection of data and human behavior, as explained in “How companies learn your secrets.” from the NY Times. I just don’t believe the way to collect and use data right now will lead to a pot of gold.

Tulips have value. Houses have value. Data has value. But the value is not as high as people tend to estimate while the user data bubble is expanding. It’s highly questionable if even a small part of these valuations can be realized. At least, I haven’t see any evidence of that, yet.

Nobody wants to hear things like that, when everybody is enjoying the user data ride. Just like nobody wanted to listen to Nouriel Roubini when he predicted the financial crisis. Nassim Taleb the “Black Swan”. Or Dave Winer the end of the data bubble. But something is wrong here, very wrong.

VCs spend billions of dollars investing in companies based on the user data model. They even tell kids to leave college early to participate in the gold rush. “You can be the next Mark Zuckerberg.”

They fund companies that need our personal data to succeed, just like the mortgage bundlers needed the junk mortgages to create fictitious AAA ratings. One day, when reality sets in and the fundamentals don’t add up anymore, the bubble will burst. A lot of money will be lost. A lot of people will be hurt.

Out of the ashes, new companies will spring up that have realistic expectations about the value of user data. And, who knows, even give us control over the data. Now, that’s valuable. Correct, Doc Searls?

When the Web was young and digital marketing in its toddler shoes, a common practice was to require customers to fill out a form before they could access a site. Cheered on by “Get all the exciting news from Brand A” or “Don’t miss out on the latest events”, many customers signed on. Once spammers started to get rich and marketers over-communicated with their audience, these forms quickly disappeared. You didn’t have to fill out a form before you watched a commercial, grabbed a brochure or visited a store, why should that be different when it comes to digital?

Some tactics never die

Marketers are rehashing that old formula, forcing people to ‘like’ the brand before they can see any content. Brands and agencies continue to be obsessed with aggregating as many ‘Likes’ as possible. In the beginning it was done through other marketing channels, social games and apps installations. Increasingly, this has been replaced by using the ‘Like’ click as the price of entry to interact with content or get special offers.

Wasn’t social about conversations, engagement and long-term benefits?

Social Media was this big party where we can interact in transparent and authentic ways, right? We didn’t like the screamer that just yelled at us. Or the “Look-at-me-guy”, right? Last time I checked, those are as annoying as the people I need to endorse on LinkedIn or praise them publicly before we can start to talk. Don’t I deserve a chance to explore what they’re all about before I endorse them to all my friends?

Don’t mistake a “like” for an endorsement

Studies show that 58% of US Facebook users expect to gain access to exclusive content, events or sales after “liking” a company, while 58% also expect to receive discounts or promotions. More insightful is what Facebook customers don’t want: Bombardment with messages (54%), access to profile information (45%), pushing things into friends’ newsfeeds (31%) and companies contacting them through Facebook (29%).

We all have busy lives. We can’t “like” every brand, we don’t have enough time and bandwidth. Does it make sense to “like” everything that’s in my closet, office, living room, garage and shopping mall?

Exactly.

The forced “like” tactic might be a good choice for brand advocates. But, they are already on your side.

Wouldn’t you rather start a conversation with people that have no defined feelings toward your brand, winning them over? Your forced “like” tactic might just result in the opposite.

We have this view of the world that the super-mega market leaders in one niche or market have a superpower that will guarantee success in new markets. The current Facebook S1 release is just another sign of this irrational view. “Facebook dominates advertising.” “Facebook more important for advertisers than Google.” “Mark Zuckerberg for President.”

The majority of brands are only good at doing one thing. If you hit the jackpot, they are good at 2 things. Almost nobody is good at three things. Remember when Facebook Places was launched and every dopey pundit proclaimed the end of Foursquare? (Including this dope.) Or when Google Wave launched? Google Buzz? G Phone? When Yahoo tried social. (Let’s not hate on a corpse.) When Microsoft got into mobile hundreds of years ago and never achieved their goals? Or when Apple tried social?

Size does matter. But it’s not everything.

There are rare instances where companies can crush a competitor: IE vs. Netscape comes to mind. But it’s not common. That’s why you shouldn’t be brainwashed by the size of a company, focus on the excellence of a company. Facebook is really good at growing their user base, allowing us to share information with family and friends. They belong in the user baser growing Hall of Fame. Does Facebook do anything else that belongs in the Hall of Fame? Deals? Places? Commerce? Advertising Conversion? Monetization. Nope. They didn’t even make the roster, riding the Minor League bus.

Will Google ever succeed in social? Google+ is doing okay but it’s not in the same league as Facebook and Twitter. They even show cracks in their dominance of the search business. Microsoft’s browser domination is gone. Soon, Facebook will see increasing fatigue and the brainwashing of a new shiny tool. While we live longer, social platforms life expectancy tends to decrease.

Don’t get fooled by size. On Sunday, many advertisers will link their advertising to Facebook pages or Twitter accounts. That’s foolish. Facebook owns all the data. Who guarantees you that they don’t sell it to your closest competitor?

Look at the big picture and have a long-term strategy. If you put more and more eggs in Facebook, you need to move some out and put them in different platforms. It’s not about new platforms, it’s about experimenting with better ways to market, platforms that convert and technologies that are effective in achieving your business goals.